consumer trends 2013

American Sugar Alliance 30th International Sweetener Symposium

Ron Sterk, Senior Editor, MarketsSosland Publishing CompanyKansas City, MO

Milling & Baking News, Food Business NewsSosland SweetenerReport

Consumer Trends 2013

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Consumer Trends 2013

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3Consumer Trends 2013

Disclaimer

We are reporters, editors and commodity journalists at Sosland, not analysts or economists.

These are my observations, comments and conclusions; I am not speaking for Sosland Publishing.

We have no trading position in the markets and do not stand to gain or lose financially from our comments, news stories or published prices.


My priorities for 2013

#3 - Speaking at the American Sugar Alliance 30th Annual International Sweetener Symposium


My priorities for 2013

#2 - The return of Hostess Twinkies on July 15, 2013


My priorities for 2013#1 - First Grand Baby born July 16, 2013


Info bombardment: Fructooliogosaccharides (scFOS) Robots - labor GMOs Obesity/diabetes Hunger Economy Energy Obamacare


Info bombardment: Large sugary drinks Global warming Food safety Food waste Food Security Crime Immigration Terrorism


Info bombardment: Social media – tweets, posts, etc. Internet Smart phones Smart cars Television & Radio Snail mail & email Magazines – print and online Newspapers – print and online


Info bombardment: How do you know what the consumer

wants, or is it what someone or some group says the consumer wants?

“Everybody but consumers seem to be focused on calories. It’s time to rethink how we talk about calories.”

- Lynn Dornblaster, Mintel International


What are real trends? Defined

Prevailing inclination A general direction or movement Veer in a new direction

Global Domestic Sweetener Industry


Some global trends Many factors affect consumer trends

Economic & political uncertainty Income growth & increased food demand in

developing countries Population growth & food production capacity Increasing adoption of GMO crops


Some global trends Economic & political uncertainty

Less disposable income currently Unrest in Middle East & other areas Terrorism – domestic Consumers remain cautious with

discretionary income


Some global trends Income growth & increased food demand

in developing countries Population/income growth in China & India Enough food not as much an issue as what

kind of food Increased demand for protein & sweeteners


Some global trends Population growth vs food production

Loooong-term: population increasing 1% annually; 9 billion by 2050

Need to increase crop output 50% by 2050 Issue may be more about infrastructure than

amount of land or crop yields Reduce food waste (30% wasted now) Gains from GMOs critical


Some global trends Increasing adoption of GMO crops

About 90% of corn and cotton, 93% of soybeans and 95% of sugar beets in the U.S. are of bioengineered varieties.

Some estimate as much as 70% of processed food in U.S. contains ingredients from bioengineered crops.

Would labeling really have an impact? Do consumers care?


Some domestic trends Increased control on businesses via

regulation, third party agendas and lawsuits

Increased numbers on entitlement roles Sustainability Aging and more diverse population


Some domestic trends Increased control on businesses via

regulation, third party agendas and lawsuits Goal is to affect what consumers buy Increased role of courts to set policy “Consumer” class action lawsuits Assault on GMOs, fat, salt, sugar, etc.


Some domestic trends Sustainability

While not necessarily a consumer trend, many are aware of it. How much they care is another question.

Producers have led the way without calling it sustainability

Proactive efforts by food processors score benefits internally & externally

Retailers (Walmart) will force the issue


Some domestic trends Aging and more diverse population

Two largest “groups” – Boomers (about 75 million) and Millennials (about 80 million) make up about half of U.S. population.

Different needs, wants, lifestyles Boomers still have greatest buying power Boomers want products that have health

benefits with focus on cholesterol & heart Boomers want added nutritional value



Millennials establishing themselves as household leaders with financial pressures

Millennials seek value/price in box stores Millennials also seek convenience Millennials want natural & maybe organic Millennials tend to buy prepared food and

take it home Millennials tend not to eat 3 “set” meals



Campbell plans 200 new products, with focus on millennials - headline in GMA Brief

Millennials are more tech savvy “Our fans, namely millennial consumers,

have high food IQs and high expectations.” - Nestle Prepared Foods Co. comment in re-launch of Hot Pockets



White alone Black alone Asian alone Two or more & other Non-Hispanic White Hispanic (any race)0%

10%

20%

30%

40%

50%

60%

70%

80%

2012 2060

13% 15%

69%

5%

8%4%

8%

63%

43%

17%

31%

About 1 in 5 Americans will be Hispanic by 2018 and 1 in 3 by 2060. U.S. Census Bureau

78%

% of total population


Trends directly affecting food Lawsuits, ballot initiatives & regulations Pressure on “BIG THREE” Weight management Healthy and authentic replace natural Distinction between sugar & HFCS Non-caloric sweeteners & mid-cal drinks Lack of personal responsibility Regulate the industry, not the person Obesity classified as a disease by AMA


Trends directly affecting food Lawsuits, ballot initiatives & regulations

New York Mayor Bloomberg’s attempt to ban “large sugary drinks”

GMO labeling initiatives in about 25 states Proposition 37 – defeated for now Revisions to school lunch, SNAP, WIC related

to nutrition density Etc., etc., etc. – Not consumer led


Trends directly affecting food Pressure on “BIG THREE”

Fat – Focus fading; consumer confusion Salt – Battle raging Sweeteners – Assault just beginning Many companies are taking initiative to

reduce all of these – Will it be enough?


Trends directly affecting food “Weight management”

Retail sales expected at $38 billion in 2013 and forecast at $41 billion by 2016

Dairy (skim/low-fat milk) largest category Low or no calorie carbonated beverages

Soda sales (regular & diet) at Coca-Cola, PepsiCo and Dr. Pepper Snapple all down so far this year

Commercial weight loss/management programs


Trends directly affecting food Healthy and authentic replace natural

Lack of definition for natural from FDA Natural didn’t resonate with consumers Organic seen as “healthier” but expensive But outside groups will continue use

“natural” in seeking legislation or taking court action to control food processors

Rise of gluten free – it’s perceived as healthy


Trends directly affecting food Distinction between sugar & HFCS

Numerous studies indicate consumers are concerned about overall calories, not whether they come from sugar or HFCS

“Consumers aren’t responding to product formulation or menu item adjustments based on specific sweetening ingredients.”

- Sara Martens, Mintel Research Consultancy


What’s on the horizon? Per capita sweetener deliveries (U.S.D.A.)

1971 1982 1992 2002 20120

10

20

30

40

50

60

70

80

90

100

110Sugar HFCS Total CS Honey/Syrup

Sugar mostly flat since mid-1980s.

HFCS declining since late-1990s but signs of leveling.

Pounds per person before spoilage & waste


Trends directly affecting food Non-caloric sweeteners & mid-calorie

beverages Will this affect corn sweeteners more than sugar

in United States? Stevia continues to make gains, but . . .

Global stevia consumption estimated at 1,278 tonnes Global sugar consumption near 170 million tonnes

Lawsuit against Cargill for calling Truvia “natural”


Trends directly affecting food Lack of personal responsibility

“It seems like with the medical advantages that have taken place, this generation would have more of an opportunity to be healthier with what we have learned about cholesterol, diet and so forth. What I think, instead, is that the study appears to sow that they are relying on modern medicine as a rescue strategy.”

- Dr. Dana King, Chair of W.V. Dept. of Family Medicine, lead authorof study showing boomers are in worse health than their parents


Trends directly affecting food Lack of personal responsibility

“While one in six boomers are willing to make changes to stay active, nearly 25% of respondents said they were unwilling to make lifestyle changes for health benefits.”

- Fonterra U.S.A. study of “healthy” boomers


Trends directly affecting food Regulate the industry, not the person

Mayor Bloomberg’s attempt to ban “large sugary drinks”

Regulators can’t realistically control what people eat – but they can control (or try) what food processors produce

Political aspect Will obesity as a disease have an effect?


Trends directly affecting food Obesity classified as a disease

May lead to more personal responsibility if it means higher insurance rates based on weight

Too early to know ramifications Certainly lead to more lawsuits


What consumers say they want Food value Food that tastes good Food that is safe Food that is easy Food that is healthy


What consumers say they want Food value (SympohonyIRI report)

“While an increasing number of positive signs are emerging, shoppers will remain intensely focused on value.”

“Shoppers (will) limit spending to channels that are perceived as offering the best value.”

“Negative news about the federal budget deficit and costs of the new health care law . . . will reinforce shoppers’ frugal behaviors.”


The consumer conundrum Taste/comfort vs healthy/fresh Active lifestyle vs gamer/couch potato Headlines:

A generation after Dietary Guidelines introduced eating habits are not improving

Boomers looking for products for an active, healthy life What consumers crave – Krispy Kreme donuts and Olive

Garden breadsticks are named among top palate pleasers in Technomic survey

Health authenticity drive latest food trends


What’s on the horizon? Per capita sweetener consumption has peaked

1971 1982 1992 2002 201290

100

110

120

130

140

150U.S.D.A.


What’s on the horizon? Focus on baby boomers & millennials Less sugar, just like less salt & less fat Competition from non-calorie sweeteners Increased efforts by governments and special

interest groups to restrict sugar consumption Lack of personal responsibility What people say they want and what they do

often are not the same


Opportunities Promote sustainability – “sells” well and

saves money if done right Take initiative rather than react Industry needs to take lead in healthy

alternatives that mean reduced sugar, such as eating in moderation, portion control, mid-calorie food and beverages


Conclusions It’s going to get harder as anti-sugar battle

grows, regulations focus on food processors Consumers will continue to be bombarded by

negative messages about caloric sweeteners “telling them” what is best for them

More sugar, less demand? People like sweets 25% of consumers across all age groups eat

indulgent snacks daily SymphonyIRI Group


Thanks

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